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Early Warning Indicators for Latin America""

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  • Fernando Tenjo
  • Martha López

Abstract

We explore the performance of a set of early warning indicators for a group of Latin American economies under the endogenous cycle perspective. For this group of countries, the paper confirms the results of work on industrialized countries that a combination of asset prices and credit provides valuable information of probable future financial crises. However, we go a step further in the analysis of emerging economies and find that a combination of capital flows from abroad and credit is an even superior leading indicator of such events.

Suggested Citation

  • Fernando Tenjo & Martha López, 2010. "Early Warning Indicators for Latin America""," Borradores de Economia 7073, Banco de la Republica.
    • Handle: RePEc:col:000094:007073
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    References listed on IDEAS

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    11. Martha R. López & Juan D. Prada & Norberto Rodríguez Niño, 2008. "Financial Accelerator Mechanism in a Small Open Economy," Borradores de Economia 4992, Banco de la Republica.
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    14. Herrera, Santiago & Perry, Guillermo, 2001. "Tropical bubbles : asset prices in Latin America, 1980-2001," Policy Research Working Paper Series 2724, The World Bank.
    15. repec:fip:fedhpr:y:2010:i:may:p:14-22 is not listed on IDEAS
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    20. Camilo E Tovar, 2006. "Devaluations, output and the balance sheet effect: a structural econometric analysis," BIS Working Papers 215, Bank for International Settlements.
    21. Fernando Tenjo Galarza & Luisa F. Charry & Martha López P. & Juan M.Ramírez C., 2007. "Acelerador Financiero y Ciclos Económicos en Colombia: Un Ejercicio Exploratorio," Borradores de Economia 451, Banco de la Republica de Colombia.
    22. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
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    Cited by:

    1. Juan José Echavarría & Andrés González, 2012. "Choques internacionales reales y financieros y su impacto sobre la economía colombiana," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 30(69), pages 14-66, December.
    2. Zárate-Perdomo, Juan Pablo & Cobo-Serna, Adolfo León & Gómez-González, José Eduardo, 2013. "Lecciones de las crisis financieras recientes para diseñar y ejecutar la política monetaria y la financiera en Colombia," Chapters, in: Rincón-Castro, Hernán & Velasco, Andrés M. (ed.), Flujos de capitales, choques externos y respuestas de política en países emergentes, chapter 17, pages 645-674, Banco de la Republica de Colombia.
    3. José Eduardo Gómez G. & Jair Ojeda Joya & Fernando Tenjo Galarza & Héctor Manuel Zárate Solano, 2013. "The Interdependence between Credit and Real Business Cycles in Latin American Economies," Borradores de Economia 768, Banco de la Republica de Colombia.
    4. Amador-Torres, Juan S. & Gomez-Gonzalez, Jose Eduardo & Ojeda-Joya, Jair N. & Jaulin-Mendez, Oscar F. & Tenjo-Galarza, Fernando, 2016. "Mind the gap: Computing finance-neutral output gaps in Latin-American economies," Economic Systems, Elsevier, vol. 40(3), pages 444-452.
    5. Juan Pablo Zárate Perdomo & Adolfo León Cobo Serna & José Eduardo Gómez-González, 2012. "Lecciones de las crisis financieras recientes para el diseno e implementación de las políticas monetarias y financieras en Colombia," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, vol. 30(69), pages 258-293, December.
    6. Jose Eduardo Gomez-Gonzalez & Juliana Gamboa-Arbeláez & Jorge Hirs-Garzón & Andrés Pinchao-Rosero, 2018. "When Bubble Meets Bubble: Contagion in OECD Countries," The Journal of Real Estate Finance and Economics, Springer, vol. 56(4), pages 546-566, May.
    7. Rincón, Hernán & Velasco, Andrés M. (ed.), 2013. "Flujos de capitales, choques externos y respuestas de política en países emergentes," Books, Banco de la Republica de Colombia, number 2013-09, March.
    8. Amador-Torres, J. Sebastián, 2017. "Finance-neutral potential output: An evaluation in an emerging market monetary policy context," Economic Systems, Elsevier, vol. 41(3), pages 389-407.
    9. repec:zbw:bofitp:2012_022 is not listed on IDEAS
    10. Ponomarenko, Alexey, 2013. "Early warning indicators of asset price boom/bust cycles in emerging markets," Emerging Markets Review, Elsevier, vol. 15(C), pages 92-106.
    11. Arteaga Cabrales, Carolina & Huertas-Campos, Carlos Alfonso & Olarte Armenta, Sergio, 2013. "Índice de desbalance macroeconómico," Chapters, in: Rincón-Castro, Hernán & Velasco, Andrés M. (ed.), Flujos de capitales, choques externos y respuestas de política en países emergentes, chapter 8, pages 301-336, Banco de la Republica de Colombia.
    12. Esteban Gómez & Andrés Murcia & Nancy Zamundio, 2011. "Financial Conditions Index: Early and Leading Indicator for Colombia," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 29(66), pages 174-220, December.
    13. Ponomarenko, Alexey, 2013. "Early warning indicators of asset price boom/bust cycles in emerging markets," Emerging Markets Review, Elsevier, vol. 15(C), pages 92-106.
    14. Juan Amador & José Gómez-González & Andrés Pabón, 2013. "Loan growth and bank risk: new evidence," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 27(4), pages 365-379, December.
    15. Ernaningsih, Indria & Smaoui, Houcem & Temimi, Akram, 2023. "The effect of capitalization on the competition-stability Nexus: Evidence from dual banking systems," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    16. Juan Guillermo Bedoya Ospina, 2017. "Ciclos de crédito, liquidez global y regímenes monetarios: una aproximación para América Latina," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, vol. 78, February.

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    More about this item

    Keywords

    Financial (in) stability; early warning indicators; financial accelerator.;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F30 - International Economics - - International Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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